Abstract
Sumner (2015) proposes that macroeconomic mismanagement on the part of central bank authorities, which leads to declines in nominal output, will cause voters to respond with populism in the ballot box. Murphy and Smith (2018) previously found evidence for this hypothesis with populism interpreted as movements away from market liberal institutions. This paper extends the hypothesis to macroeconomic mismanagement and its relationship with democratic political institutions. It finds both that recessions foreshadow a lower probability of a dictatorship becoming a democracy, and a higher probability of a democracy becoming a dictatorship. The relationship with autocratization is most visible after fifteen years, while the negative relationship with democratization is far more persistent over time. These findings, it must be stressed, are historical and descriptive, not necessarily causal.
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